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The FX Research Team at Rabobank has turned more pessimistic about the mid-term outlook for the USD/JPY after this week’s bearish move below104.00 support.

Key quotes

“There are several reasons to suspect that USD/JPY may stay lower for longer. The obvious reason is broad-based USD weakness. However, the Japanese growth outlook may also be a factor.”

“The fact that interest rates are now so low across the G10 changes the dynamic for domestic Japanese investors and this may enhance relative JPY strength going forward.”

“Politics will also play into the outlook for the JPY. Investors will be looking for reassurances regarding PM Suga’s reformist agenda while geopolitical factors suggest that there is scope for the JPY to benefit from safe-haven demand in the medium-term.”

“We a forecasting USD/JPY at 103.00 on a 3-month view compared with a previous forecast of 105.00.”